Connaught Action Grouphttps://connaughtactiongroup.com
Keeping you informed and campaigning for the truth about your investments...Fri, 09 Mar 2018 23:49:39 +0000enhourly1http://wordpress.com/https://s2.wp.com/i/buttonw-com.pngConnaught Action Grouphttps://connaughtactiongroup.com
FCA on the ropes: your chance to land a punchhttps://connaughtactiongroup.com/2016/01/24/fca-on-the-ropes-your-chance-to-land-a-punch/
Sun, 24 Jan 2016 20:31:31 +0000http://connaughtactiongroup.com/?p=743Connaught victims may have seen the House of Commons Adjournment Debate on 12 January. The Chairman of the Connaught All-Party Parliamentary Group, Guto Bebb, and MPs who’ve been following the case made some highly pertinent points and raised crucial questions about this long-running case.

The Minister looked distinctly uncomfortable delivering a response that was clearly drafted by Capita’s pals at the Financial Conduct Authority, which we understand has taken the additional precaution of placing two of its employees on long-term secondment into the Minister’s office in a bid to shield her from any correspondence from the public that might contradict the regulator’s spin.

Guto and Treasury Select Committee member John Mann have delivered another decisive blow this week by calling for a House of Commons debate into whether the FCA is fit for purpose, which will take place on Monday, 1 February.

Scheduled for three hours in the afternoon rather than half an hour in the evening, it is likely to attract a lot more MPs and massively more media coverage. It will focus on three main regulatory failures:

The Connaught Income Fund Series 1

Interest-rate swap mis-selling

Cancellation of its investigation into banking culture

Please contact your Member of Parliament to ask him or her to attend this crucial debate. If you don’t have his or her name or contact details, they can be found using your postcode here. If you are able to visit your MP’s constituency surgery to discuss the case, that would be even better. If you need information or would like us to suggest some questions he or she might ask, please email us at connaughtactiongroup@gmail.com. We’re particularly keen to hear from anyone living in West Worcestershire, whose MP, Harriett Baldwin, is the Economic Secretary to the Treasury.

We’ve also teamed up with Bully Banks, the group representing IRHP mis-selling victims, to organise a demonstration outside Parliament to show the strength of consumer feeling. It is CRUCIAL that as many Connaught investors as possible turn up, as we need to show politicians and the FCA that we demand that the regulator acts urgently and decisively to get our money back and protect the public from the wrongdoers.

PLEASE, PLEASE join us. We’ll be meeting directly outside the main entrance to the Palace of Westminster at 2.30pm. We expect the demonstration to last around 30 minutes, following which as many of us as possible will stay to watch the debate from the public gallery and others will retire to a local hostelry or head home. It would help us to have some idea of numbers so please email us at connaughtactiongroup@gmail.com if you plan to attend.

By revving up your MP to attend the 1 February debate and by attending the demonstration, you can show your support for Guto, John and other politicians who are working tirelessly to ensure our case is top of mind with the Minister and a thorn in the FCA’s side and for the Action Group.

With the FCA about to announce its third Chief Executive in less than a year and facing more scrutiny from politicians and the media than ever, we sense that it needs to achieve some high-profile wins if it is to survive in its current form. We urgently need your help to ensure that our plight is top of mind when the FCA board considers why Parliament is questioning whether it is fit for purpose and considers what it needs to do to save itself.

]]>connaughtactiongroupUrgent: Please contact your MPhttps://connaughtactiongroup.com/2015/11/05/urgent-please-contact-your-mp/
Thu, 05 Nov 2015 16:24:33 +0000http://connaughtactiongroup.com/?p=737The Action Group believes that the outcome of our claim against Capita now sits on a knife-edge. Will the Financial Conduct Authority continue to protect the people who made the scam possible, then covered up and walked away when the realised what they’d done? Or will it throw the book at them (and force them to write out a big cheque to us, their victims)? The answer could lay in your hands.

The Action Group played a leading role in lobbying for the removal of the FCA’s outgoing Chairman, Martin Wheatley. Early indications are that Tracey McDermott, who’s leading the organisation while a search is underway and could possibly be confirmed on a permanent basis, is far less complacent. So we’re in a better place than we were six months ago.

But getting what we want depends on cranking up the political pressure. This is best done by working through the All-Party Parliamentary Group established by Guto Bebb, Member of Parliament for Aberconwy. It’s thanks to him that we got the Westminster Hall debate in 2014, the FCA-hosted negotiations and now the FCA enforcement investigation.

The APPG could do a lot more to help us. But it needs our help first. Specifically, it needs more members. It is particularly short of Labour MPs, more of whom would make it more representative, but it needs to recruit additional members of all political stripes.

If you have not already done so, please, please write to your MP to ask him or her to join. If you don’t know who represents you, you can find out here.

A template letter can be found here. As a minimum, please edit it to reflect your name and address, your MP’s name and the amount and type of investment that you made. However, if you could also add some ‘colour’ such as the personal consequences you’ve suffered as a result of the Fund’s collapse, that would be a huge help.

We all know that this case has been dragging on for a very long time and it is tempting to write it off and put no more time into it. But we really are close now to the point where the FCA decides which side it’s on and whether it prefers incurring the wrath of 1500 investors or angering FTSE 100 outsourcing company. And it is essential that we have as many MPs as possible on our side as the FCA weighs up its options…

If your MP requests more information about the case, please contact connaughtactiongroup@gmail.com with their contact details, or give them ours, and we’ll do all we can to help.

Many thanks.

]]>connaughtactiongroupHELP US TO HELP YOU!https://connaughtactiongroup.com/2015/07/16/help-us-to-help-you/
Thu, 16 Jul 2015 04:10:34 +0000http://connaughtactiongroup.com/?p=729You doubtless heard that the Financial Conduct Authority-intermediated negotiations between the Fund’s hapless Operators and the liquidators fell apart in March, after nine months and countless hundreds of billable hours of fruitless discussion.

What you’ve heard about the reasons for the break depends on who you are. If you’re a politician, you’ve probably been fed the lying toad Martin Wheatley’s self-serving spin, namely that the noble, consumer-focused FCA was unhappy with Capita’s best offer and decided it could do better by launching an investigation.

If you’re close to the inside track of investor sentiment you probably picked up something much closer to the truth. We understand the FCA made it clear to all parties that it was never going to issue a restitution order against a ‘big fish’ such as Capita – indeed, the only time it or the FSA has done so is when it forced an individual to compensate a hedge fund for causing it to lose money in a manipulated market – so the best the liquidators could hope for was a token contribution. With expectations set low, a deal was negotiated under which Capita would have made a small payment toward investors’ losses in return for a no-investigation, no-penalty ‘get out of jail free’ deal from its captured, self-serving regulator.

Sadly for Capita, fate intervened, in the shape of an imminent, too-close-to-call General Election. At the final hour, the Grey Vampire realised his tenuous grip on the post would be severed, very publicly, if 1500 investors were forced to go to the media to protest about such a dire financial outcome, and about a division of a FTSE100 outsourcing giant that generates much of its income from taxpayers being allowed to get away almost scot free with concealing a £100m+ fraud. So he walked away from the deal to prevent embarrassing his political masters. That’s the truth, despite Wheatley’s protestations to the contrary.

If there’s a silver lining to this particular cloud, it’s that Capita’s top brass must be spitting tacks. Oh, and the fact that we know politicians recognise that we have the moral authority and influence with the media that come from having been very badly treated, for very long, by the regulatory authorities.

So we should not be disheartened. Capita, and its protectors at the FCA, lost a battle, and the war is going our way. So we should do more of what we know works: briefing politicians, and being a thorn in the side of the FCA. That way, the FCA will realise that, for once, the organisation’s interests will be best served by putting together a restitution and FSCS package that compensates us in full and thus gets us and politicians off its institutional back, even if it risks the ire of its client, Capita.

As you know, the FCA has announced an investigation into the Operators’ conduct. When the FCA nixed discussions in March, we suspect the plan was to drag out the investigation for a couple of years, then resurrect a deal similar to the one it scuppered. But Wheatley’s position gets more tenuous by the day, and if we can play a part in his departure, it is likely that we will have the ear of his successor.

To do this, we need your help. Here’s what we need you to do.

Write to your MP

As you probably know, an All-Party Parliamentary Group has been established to represent investors’ interests at Westminster; it is chaired by Guto Bebb MP. It urgently needs more members, both because size matters and because more people can make more noise. So we’d like you to write to your MP to ask him or her to join the group (or to re-join it if he/she was a member before the Election).

To help you, we’ve drafted three letters. Letter one is for existing MPs (those re-elected this May) who were not previously members of the APPG. Letter two is for existing MPs who were in the APPG in the last Parliament. And letter three is for MPs newly elected in 2015.

Don’t know who your MP is, or when he/she was elected to Parliament? Enter your postcode here and click on ‘Profile’ on the left menu.

Don’t know whether your MP was a member of the APPG before the General Election? There’s a list here.

Whichever version of the letter you use, PLEASE personalise it. Fill in their name and yours, as a minimum. If your mojo’s rising, feel free to add some personal detail about how much money you invested, the stress or hardship it has caused you or family members, or anything else that will make the MP empathise with you.

You will note that the letters all ask MPs to write to Martin Wheatley’s ultimate boss, Harriett Baldwin, the new Economic Secretary to the Treasury. It also refers to a briefing document to help MPs drafting such correspondence. It can be found here. Please ensure you enclose it with your letter to your MP.

Attend the FCA’s annual public meeting – and ask a question

The FCA has repeatedly refused the courtesy of a meeting with the liquidators’ committee elected by you to represent your interests. We think that’s unacceptable, given that more than three years have passed since the Fund was suspended and that the regulator has only now announced an investigation, despite us demanding one in October 2012. And it’s a downright insult given that the FCA, and the FSA before it, missed so many opportunities to stop the Fund before it got going, or to bring it to an earlier end.

Luckily for us – and unluckily for the FCA – it is obliged to hold an annual meeting, and to take questions from the public. That meeting is scheduled for 10am next Wednesday (22 July). We’d like as many people as possible to attend, and to ask questions.

If you can make it, please email connaughtactiongroup@gmail.com to let us know. We’ll provide information on how to register, and will also liaise with you regarding question preparation. We have some specific questions we’d like your help in asking, so please get in touch with us BEFORE you register.

]]>connaughtactiongroupThe Calm Before the Storm?https://connaughtactiongroup.com/2014/09/16/the-calm-before-the-storm/
Tue, 16 Sep 2014 04:56:41 +0000http://connaughtactiongroup.com/?p=723Things have been quiet of late on the Connaught front. Back in July we all heard that the FCA offered to mediate negotiations between ‘the parties involved’; it subsequently emerged that the regulator had set a deadline of 31 October for agreement to be reached. Since then, we’ve heard nothing.

While we await the outcome of that process, one of the Action Group’s UK representatives has been asked to contribute to a paper about the FCA, produced by the Bully Banks pressure group. Bully Banks represents the directors and shareholders of small and medium-sized businesses (SMEs) that have fallen victim to bank mis-selling. To date it has been concerned principally with getting justice for those mis-sold interest rate hedging products, known as ‘swaps’, by the major High Street banks.

Bully Banks and the Action Group have a lot in common: both represent victims of misconduct by large regulated firms and are hoping that the FCA will achieve redress for them. Both harbor concerns that their losses would not have been incurred in the first place if the FCA had been on the ball, and fear that the FCA is, on occasion, inclined to protect the big players in the industry from their customers, when in fact it should be doing the opposite.

In short, we are both worried that the FCA, and its predecessor the FSA, may have fallen victim of regulatory capture. In Bully Banks’ case, witness the way in which mis-selling of swaps continued for years with little or no attempt to stop it, the banks’ series of successes in lobbying the regulator to water down and delay the eventual redress scheme, and the departures of senior figures involved in the scheme’s implementation to well-paid roles in the banks that were among the worst offenders.

Connaught investors, too, have grave concerns. Why was Capita Financial Managers allowed to continue to look after billions of pounds worth of funds when its systems and procedures were known to be so flawed following the discovery of huge losses in the Arch Cru funds? Why was it not made to strengthen its balance sheet, or increase its insurance cover, so it would have the capacity to meet future claims? What did the FSA know about Capita’s concerns about the Fund when it handed over the operator role to Blue Gate? Why did it not call in the police after George Patellis blew the whistle in January 2011?

Why, when investors finally became aware of what had happened in 2012 and started contacting their MPs and the relevant Ministers, did the FCA spend the next 12 months systematically mis-briefing politicians about its actions in relation to the Fund, the cause of investors’ losses and its capacity to achieve resolution? And why has nothing yet been done about the fact that Capita’s half-year results, issued the week after the negotiations were announced, contained forward-looking statements suggesting that everything looked rosy, whereas in fact we know the company faces a payout that could result in the suspension of its dividend? Policing the transparency of quoted companies’ announcements to the market is also the responsibility of the FCA.

Regulatory capture is only one possible explanation; there may be others, and we stress it is possible that the FCA is a robust and effective regulator that is not inappropriately close to to Capita and the banks – the organisations, coincidentally, who fund the supervisory body by means of a mandatory levy.

But it can do no harm for victims of financial services misconduct to compare notes and provide the regulator, and the politicians who ultimately created the organisation and the law it is responsible for enforcing, with constructive criticism and helpful suggestions on how regulation can be improved.

In this spirit, we and Bully Banks have jointly produced a discussion paper covering how the FCA might better protect itself from the risk of regulatory capture; it can be viewed here. If you have any suggestions on anything we’ve missed or ways the document might be improved, please email us.

As you would expect, we have gathered an extensive dossier on how the FSA/FCA has conducted itself in relation to the Fund. Even if the current negotiations result in our losses being made good by the firm whose spectacular negligence and extensive systemic failures made them possible, and whose senior management knew about the Fund’s failings but chose to conceal them from us, or if the FCA achieves the same goal by issuing a restitution order, we recognise that we have an obligation to work constructively with the team currently leading the regulator, to ensure that similar problems cannot happen in the future.

In the event that the current process results in a similar fudge to the Arch Cru redress scheme (a token contribution from Capita) and the swaps one (less than a third of the earmarked money paid out to date) or if the regulator refuses to engage with us to reform itself, the collaborative approach will have to be replaced with a more confrontational one. In that eventuality, our plan is to hand the dossier to the media and politicians and ask them to replace the FCA with a new organisation, with a different remit, governance regime and senior team. Given the length of the charge sheet, we would be surprised if the organisation survived in its current form, so our role would be to work with politicians to design the replacement regulator and consult on the kinds of people that should be in positions of influence within it.

We hope that we and Bully Banks are worrying unnecessarily about the FCA having been captured by vested interests. The negotiations currently underway will serve as a litmus test of its good faith, and the respect or contempt in which it is held by Capita. If the FCA threatens Capita with removal of permissions from every regulated subsidiary – a prudent step, given that they all share a common parent that was willing to conceal evidence of serious wrongdoing from investors, leave a subsidiary chronically undercapitalised and uninsured and publicly threaten to tip it into administration if faced with a restitution order – and if the Capita realises it will go through with the threat, we will get what we want. And what would Capita get it return? Perhaps the right to sell those subsidiaries, rather than have to close them down; possibly even the right to continue trading them, albeit with stronger balance sheets and insurance and very much closer supervision.

But even if the ugly rumours about regulatory capture are well founded, we would like to think that the organisational instinct in favor of self-preservation will trump the desire to protect its client group in the industry, Capita included, and that the regulator will therefore ensure that Capita pays up, if only to save the FCA’s institutional skin.

More news as we have it!

]]>connaughtactiongroupMPs, Minister debate Connaught fund failurehttps://connaughtactiongroup.com/2014/05/09/mps-minister-debate-connaught-fund-failure/
Fri, 09 May 2014 13:33:14 +0000http://connaughtactiongroup.com/?p=718Members of Parliament and the newly appointed Economic Secretary to the Treasury, Andrea Leadsom, yesterday debated the failure of the Connaught Income Fund and the roles of Capita plc and the Financial Conduct (previously Services) Authority in its failure.

Vale of Glamorgan MP Alun Cairns, who leads the informal All-Party Parliamentary Group (APPG) and called the debate, helped by interventions from a number of colleagues, ably identified the central failings of Capita that enabled investors’ money to be lost – namely the misleadingly inaccurate information memorandum, the absence of effective systems and controls for the operation of the Fund and, perhaps worst of all, its decision to conceal from investors, IFAs and the regulator the many material concerns that it became aware of about the promotion, operation and risks associated with the Fund that culminated in its decision to terminate its role as Operator.

The speech and interventions also hinted at one of investors’ long-standing concerns, namely whether their losses in the Fund could have been prevented or much reduced by more effective interventions by the regulator, the FSA/FCA.

Ms Leadsom then responded on behalf of the Treasury. She began by mentioning that she has several constituents who have lost large sums of money as a result of the Fund’s failure. We at the Action Group would love to hear from them. If you live in her constituency, South Northamptonshire, please email us.

The Minister confirmed that the FCA is ‘considering all avenues by which investors might be compensated’ as well as looking into allegations that Capita Financial Managers Limited set up and operated the Fund in a negligent fashion, that it failed in its duties under FSMA (the Financial Services and Markets Act 2000) and that the information memorandum and quarterly Fund reports that it issued may have been fraudulently misleading.

While she did not spell out the fact that the Fund and investors could soon launch civil actions against Capita, its directors and other employees or anyone else, Ms Leadsom confirmed that litigation is an option and indicated that there is some urgency to this, because although we would argue that the statute of limitations gives us three years from the date that we became aware of problems to issue proceedings, there is a small risk that Capita might try to argue that we have six years from the date that the wrongdoing began.

With this in mind, any investor who has not yet completed his or her assignment of claim is strongly advised to do so immediately. If you have not received the paperwork, a link to the relevant email address can be found in the Action Points section at the end of this blog.

Ms Leadsom had clearly been briefed on the case by the FCA, so should be forgiven for repeating in good faith some of the half-truths habitually trotted out by that organisation in its defense, especially those relating to the adequacy or otherwise of its actions after George Patellis blew the whistle in January 2011 and the astonishing leniency with which it treated Capita after losses were discovered in another scheme it ran, namely Arch Cru. A volunteer for the Action Group has written to the Minister setting the record straight and requesting a meeting. We will update you on whether or not one is granted.

Investors based in the UK can watch footage of the debate here and here (click on Alun Cairns to the left to skip to the relevant footage).

The above links may not work for those based abroad. Alternatively, the full transcript can be viewed on Hansard here.

INVESTOR WARNING: CAPITA PLC (LSE:CPI)

We are aware that many investors in the Connaught Income Fund Series 1 subscribed to the scheme with money held in pension schemes, especially SIPPs (Self-Invested Personal Pensions). Many such investors also hold shares in dividend-paying FTSE100 companies, including Capita plc. If so, we think they should consider selling their Capita shares.

The cost to Capita of buying investors’ positions in Connaught at the price we paid, plus perhaps two and a half years’ missed income distributions and any consequential losses, less the distributions made since suspension in March 2012, is likely to approach £120m. We doubt that the highly geared firm can achieve this without suspending its dividend. This is likely to have a negative impact both on the share price and on investors who rely on the company for income.

We believe this is the least bad outcome for Capita shareholders. Once the firm replaces investors as the Fund’s principal creditor, it will benefit from the proceeds of the liquidation, such as realisations from the loan book and settlements from the various professional services firms whose negligence contributed to the losses, less the liquidators’ and legal costs. These recoveries could eventually result in Capita receiving a significant proportion of the compensation back onto its balance sheet.

Shareholders should, however, also consider the prospects of the firm in the event that the FCA does not issue the desired restitution order and the management team chooses not settle voluntarily.

Some of the matters over which claims could be brought could result in Capita being barred from competing for future public sector contracts. These represent much of the company’s revenue.

Furthermore, the group might, unwisely, replay the argument it used in 2009 to escape meeting the full costs of its negligent management of another investment scheme, Arch Cru, when it claimed that the subsidiary holding the contract (and also operating and promoting the Connaught scheme), Capita Financial Managers Limited, had a weak balance sheet and insufficient insurance to meet the claim, and argued that if the regulator issued a restitution order, the parent would simply place the subsidiary in administration and walk away.

We suspect that if investors got even the slightest whiff of this argument being raised this time round, City journalists would be briefed and the news would be circulated to the group’s biggest customers. Aware that the parent was not willing to place the resources of the group behind its subsidiaries, prudent clients would have no alternative but to terminate contracts and switch to other, more secure suppliers. The consequences of such a loss of business could be catastrophic, especially given the group’s high level of gearing.

Also, Capita currently has 16 subsidiaries registered with the FCA able to undertake financial services activities. The regulator would have to review whether these, like CFM, were under-capitalised and under-insured and hence unable to continue trading without a significant injection of capital or the purchase of additional insurance. It would also have to consider whether, given the concealment at group level of the Connaught problems, the group was unfit, as a result of its deficient culture and governance, to operate at all in the area of regulated financial services.

Finally, there is a risk that litigation could be brought against some of the employees and directors who were party either to misleading investors or to withholding from us material information. It is unlikely that those individuals collectively would have the resources to meet such a claim, which could result in their bankruptcies. Given that undischarged bankrupts cannot serve as company directors, there is a risk that directors of the plc and some key subsidiaries could be compelled to resign, just as the company is fighting the catastrophic, self-inflicted problems outlined above.

There is, fortunately, good alignment of interests between investors, the FCA, Capita’s management and the group’s shareholders: they are all better off if the FCA issues a full restitution order, and Capita accepts it gracefully. This would enable the FCA to redeem itself for its and the FSA’s many failings in respect of Connaught and to position itself as a capable and rigorous regulator, unafraid, under its new name and Chief Executive to hold a large firm to account for its failings. Capita’s directors would not face claims against themselves personally, and while there might be an expectation for those who caused or concealed the problems to leave the business, they could at least do so with their finances intact and able to seek employment and directorships elsewhere. Capita itself would not face a catastrophic loss of contracts, though we would hope that the FCA would in due course review the finances, insurance and culture of its regulated subsidiaries, and change would be needed to prevent another Arch Cru or Connaught from occurring. Shareholders’ losses would be limited to the cost of compensating Connaught investors, plus perhaps a modest reduction in income or return on equity from financial services in the future as a result of a review by the FCA.

Most important, investors would be put back in the position they would have been in had Capita bothered to do even the most basic due diligence before agreeing to promote the Fund. That, surely, is not an unreasonable expectation.

We very much hope that all those concerned see the benefits to doing the right thing. In the meantime, we’re sellers of Capita stock.

ACTION POINTS

If you have not yet returned your completed assignment of claim form to Duff and Phelps, it is ESSENTIAL that you do so RIGHT AWAY. We really cannot overstate the importance and urgency of doing this. Not only does it increase the amount of money that can potentially be claimed from those who are responsible for our losses, but it also adds enormously to the leverage that we have over those people, and the FCA, when demanding a restitution order or voluntary settlement.

Should you not have received the necessary paperwork, or if you require help or advice before completing it, please email Duff and Phelps RIGHT AWAY. PLEASE DO IT NOW!!!!!!!!!!

If you live in Andrea Leadsom’s South Northamptonshire constituency, we at the Action Group would like to hear from you. Please email us.

]]>connaughtactiongroupATTENDING PARLIAMENTARY DEBATE? EMAIL US FIRST!https://connaughtactiongroup.com/2014/05/01/attending-parliamentary-debate-email-us-first/
Thu, 01 May 2014 14:57:51 +0000http://connaughtactiongroup.com/?p=716Since yesterday’s email went out, we’ve heard that the public gallery at Westminster Hall, where the Parliamentary debate about the failures surrounding the collapse of the Connaught Income Fund Series 1 will take place at 11am on Wednesday 7 May, is really tiny. Apparently it can accommodate only around 20 people.

We’re keen that researchers representing MPs who cannot make the debate can find seats, along with representatives of the Financial Conduct Authority and members of the press. After all, the whole point of the exercise is to put pressure on the FCA to require Capita to give us our money back, and for Capita not to fight such a restitution order – goals that require maximum political, media and regulatory pressure.

What this means is that we think there could be as few as 10 seats for investors. Worse, places cannot be reserved in advance. If you are thinking of attending, PLEASE email us at connaughtactiongroup@gmail.com before planning your trip. We’ll tell you how many investors have already stated their intention to attend, so you can make an informed decision about whether or not it’s worth making the journey.

While we’re obviously disappointed that it isn’t possible for all investors to see and hear the debate, we understand that the proceedings will be reported in Hansard, so everyone will get to know exactly what is said.

If so, and if you possibly can, please join us and other investors at
Westminster Hall, in the Palace of Westminster, where Alun Cairns MP, who with
colleague Guto Bebb has founded an informal All-Party Parliamentary Group
representing the interests of Connaught investors, has called a debate on the
subject for 11am.

We understand that the new Economic Secretary to the Treasury, Andrea Leadsom,
will be answering questions put by MPs on behalf of constituents who have lost
money as a result of investing, in good faith, in what was (mis) represented as
a guaranteed, low-risk scheme. Some of the difficult questions likely to be
raised include:

– Why did Capita conceal from investors what it knew about Nigel Walter’s past,
the many ways in which it had misled investors about how the scheme operated,
and the multiple failures of the Fund to operate as described in the Information
Memorandum?

– What did the FSA, as it then was, know, and when, and why did it fail to act
to protect investors?

– Why has the FCA still not yet issued a restitution order against Capita for
the full quantum of investors’ losses? Does it intend doing so?

Please contact your MP to ask him or her to attend the debate and to ask these
and any other relevant questions. Information on how to do so can be
found here.

We would love to see you at the debate. If you are able to make it, please
arrive at least 20 minutes before the 11am start time to get through security.
We plan meeting outside the main entrance to the Palace of Westminster at
10.30am.

]]>connaughtactiongroupURGENT ACTION REQUIRED!https://connaughtactiongroup.com/2014/04/18/urgent-action-required/
Fri, 18 Apr 2014 05:14:24 +0000http://connaughtactiongroup.com/?p=710We hear that investors recently received correspondence from Duff and Phelps asking them to assign their rights to litigate over certain aspects of the promotion and operation of the Fund that can only be brought by investors, rather than the Fund itself.

We believe it is ABSOLUTELY VITAL that ALL investors act on this request and sign and return the paperwork at the EARLIEST POSSIBLE OPPORTUNITY.

If you have not yet received your letter, please email Duff and Phelps, who can be reached at this address: tcifs1@duffandphelps.com.

PS: Keep an eye on the Parliamentary Calendar. A debate about the Fund is likely to take place in Westminster Hall in the next few weeks. If you can possibly attend, please do!

PPS: Please, please sign the assignment of litigation rights. Do it now!

]]>connaughtactiongroupConnaught in the newshttps://connaughtactiongroup.com/2014/01/26/connaught-in-the-news/
Sun, 26 Jan 2014 07:37:34 +0000http://connaughtactiongroup.com/?p=703The plight of investors in the Connaught Income Fund Series 1 was highlighted by two major UK media today (Friday, 24 January).

In addition, the BBC report showcased allegations that the former regulator, the FSA, missed opportunities to close down the Fund which could have reduced investors’ losses. It included an interview with former Tiuta plc Chief Executive George Patellis, who remains astonished at the lack of action by the official body in response to him blowing the whistle in January 2011.

Both Rob Davies of the Mail and Shari Vahl of You and Yours reported our demand that the FCA issue a restitution order forcing Capita to buy our positions in the Fund at the price we paid, plus the two years’ missed interest and any consequential losses, less the distributions received from the liquidator to date. We anticipate this would cost Capita about £112m, of which an uncertain proportion could potentially be recovered by the liquidators in a series of litigations, over a number of years.

The Action Group continues to believe that this is the only just outcome. Investors were sold a ‘guaranteed’, ‘low risk’ fund generating a quarterly ‘income’. Two years have passed since the last income distribution, the guaranteed right to withdraw our investments on 30 days’ notice after the first six months was suspended two years ago in March, and rumours of multi-million pound loans to a convicted fraudster and a mentally deficient relative of a director suggest that the risks never were as described. Blame for all these failings falls at Capita’s door.

We hold Capita wholly responsible for all investment raised using the first information memorandum, which we now understand was written by Nigel Walter and was issued, unchecked, by the outsourcing giant. The same goes for funds subscribed in response to the Blue Gate version, because Capita has made the mistake of admitting that it either drafted or approved that document too. Likewise we believe Capita should make good losses on trading that occurred on its watch – it failed to carry out the most basic checks to ensure investors’ money was safe – as well as those that occurred after handover to Blue Gate, because we know at that point that Capita identified but failed to fix the many problems with the Fund, let alone to warn current and future investors that their money was in jeopardy.

Investors have good reason to doubt the competence of the regulator that existed until March 2013, the Financial Services Authority. It failed to prosecute Nigel Walter for his role with UKLI, allowing and emboldening him to move on to his next scam. Capita’s flagrant and repeated breaches of FSMA suggest it held the regulator in utter contempt. And the FSA’s failure to act on credible claims of investor jeopardy and wrongdoing presented by George Patellis is astonishing.

We now have a new regulator, the Financial Conduct Authority. Will it prove to be as useless as its predecessor? Or will it use this high profile case to prove to the industry that it has teeth, and to investors that they can have confidence in it? Our demand for a restitution order will be the first major test of its mettle.

]]>connaughtactiongroupURGENT: Help us to help youhttps://connaughtactiongroup.com/2013/10/05/urgent-help-us-to-help-you/
Sat, 05 Oct 2013 23:27:48 +0000http://connaughtactiongroup.com/?p=695The Connaught Action Group is asking all investors in the Connaught Income Fund to help us help you get your money back.

Last February, some investors were approached by BBC Panorama in connection with an edition that was to expose instances of British savers, especially pensioners, losing money when investment schemes went wrong. An investor and a key whistle-blower kindly agreed to talk to the programme-makers and an excellent package was produced by an award-winning team.

Unfortunately, the other case that was due to be highlighted resulted in the BBC attracting some adverse publicity for a minor infringement of journalistic best practice. The perpetrator of the scam threatened the BBC with litigation; sadly the broadcaster reacted by pulling it at short notice. We understand that he has himself subsequently been a person of considerable interest to the Police and that there is no obstacle to the edition being shown. But still it sits on the shelf.

We would like every investor to email or write to Fran Unsworth, Head of News and Current Affairs, at the BBC, making the following points in your own words:

How much you invested

How much you’ve had back to date (about 10 percent)

How much you could have lost (about 70 percent)

That this money was either pension money or savings intended to keep you comfortable in your dotage

That the case raises issues relevant to every pension investor in the UK about the competence and probity of large firms such as Capita that manage investors’ pension money and the regulator, the Financial Conduct Authority, that is supposed to oversee them

If you have a ‘hard luck’ story, please tell it!

It is important that correspondence is the legitimate voice of wronged investors so we would ask that IFAs do NOT write in unless they are themselves investors. Instead, please encourage your clients who were in the fund to do so.

With the FCA still showing no signs of issuing a restitution order against Capita, we need the programme to go out as soon as possible to keep up the pressure on both poacher and gamekeeper. Please do it now!

]]>connaughtactiongroupThe Duck that Laid the Golden Egghttps://connaughtactiongroup.com/2013/07/16/the-duck-that-laid-the-golden-egg-2/
Tue, 16 Jul 2013 13:53:46 +0000http://connaughtactiongroup.com/?p=688Here in the States, we like to say, ‘If it walks like a duck, and talks like a duck… must be a duck!’ You Brits are sticklers for detail, so you’ll probably say there are members of the anatidae family that walk and talk much like ducks, but in fact belong to other species of bird. Who cares? They’re ducks, near as dammit.

We make this point because the brochure for a new investment scheme reached us this morning, and already it’s waddling about and quacking just like the Connaught fund that suckered investors out of about £70m. It’s called the TB Walker Crips Income From Short Term Lending Fund.

The proposition is similar: the fund will pay investors interest at 8.4 percent a year (which can be distributed or capitalised, according to preference), based on lending out the money at higher rates to residential bridging loan borrowers. There’s an Operator (called, in this case, the Authorised Corporate Director – a phrase that may resonate for anyone who lost money in the collapse of the Arch Cru funds), an Investment Manager (equivalent to Connaught’s asset manager) and not one but three Short Term Lenders (the equivalent of the Specialist Partner). The only addition is that the roles of Operator and Depositary have been split, largely because the ACD, T. Bailey Asset Management Limited, does not appear to have FCA permissions to hold client monies. Even so, I’m sure you pedantic limeys will admit that, while investors were never informed, a similar arrangement was in fact in place for part of the life of the Connaught fund, when a division of Capita continued to act as custodian for some months after the firm had run away from the Operator role, because the fall-guy replacement, Blue Gate Capital, did not initially hold the relevant permissions. Waddle, waddle!

Another intriguing similarity is revealed by the trade media coverage of the fund launch. Turns out that the new scheme is the brainchild of someone we all know: Connaught’s James Allen. Allen is not our favorite guy, not least because he continued promoting the fund as late as mid-2011, long after we believe he either knew or should have known that there were problems with it: (http://www.financialreporter.co.uk/spotlight/?ID=7062). Moreover, the Walker Crips fund shares something else with Connaught: key parties such as the ACD, Fund Manager and Short Term Lenders have balance sheets that are tiny in comparison with the £500m target fund size. Indeed, of the three Short Term Lenders, the parents of two have NAVs of less than £1m, while the third – Bridgebank Capital – was insolvent as at the last accounting date. Quack, quack!

The IM reveals some minor differences: interest will be paid monthly rather than quarterly (yay!), liquidity is quarterly rather than monthly (boo!), and the fund is described as medium to high risk, rather than low-risk, as was the case with Connaught (whatever!). But the document is, we think, almost as flawed and incomplete.

For a start, the risk warnings (page 13) omit the single biggest danger that faces investors in this fund, and that caused losses in the Connaught equivalent: fraud. Anyone thinking of investing in the Walker Crips scheme should consider whether sufficient protections are in place against the following:

• Monies being passed to or returned the Short-Term Lenders (STLs) but used to meet the running costs of that business, or its parent, or another company in the Group, or for property acquisition or development by one of those companies, the principals, or their relatives or associates;
• Monies being loaned for speculative property development, as opposed to residential bridging mortgages;
• Monies being loaned to companies, whether incorporated in the UK or in murky offshore jurisdictions, rather than individuals;
• Non-recourse loans being made to family members or other connected parties;
• The re-financing of existing, non-performing loans made by other subsidiaries of the STLs;
• The STLs retaining monies drawn down for approved loans where either the borrowers changed their minds or the STLs rejected their applications at the last minute so they could hold on to the advances;
• The STLs retaining monies returned by borrowers, leaving the charges in place on the properties so it looks as if the money is still outstanding;
• The STLs letting borrowers connected to themselves off interest or even capital repayments;
• Collusion between the STLs and borrowers, valuers, solicitors or contractors, intended to defraud the fund

All of the above could, in theory, happen without the knowledge and active involvement of the Fund Manager. But it would be very much easier to do, and would take a lot longer to spot, if the FM were in on the scam. We stress that there is, at this stage, no firm proof that James Allen, or indeed anyone else at Connaught, did anything illegal, and there is of course no suggestion that the three STLs appointed by the Walker Crips fund have any intention of doing a Tiuta, it seems to us there’s a lot of waddling and quacking going on.

Potential investors may be tempted to entrust their money to this scheme because it enjoys the regulator’s stamp of approval. They should consider that every party involved with the Connaught fund, excepting Connaught itself, was also FCA registered. Tiuta was – and still is – registered, but that didn’t stop the principals from using investors’ monies for all kinds of things never envisaged in the IM, or from being insolvent. Capita Financial Managers (CFM) is registered, but that didn’t stop it from issuing a misleading IM, operating the scheme other than as described, then walking away without alerting investors (or, we strongly suspect, the FCA), when it realised the extent of the mess it had created. It remains so despite having left investors in the Arch Cru funds nursing huge losses because the division’s combined net assets and insurance cover totalled a fraction of the size needed to meet investor losses in that one scheme alone. We hear that investors are close to bringing a case against CFM, which if successful would render it insolvent. And yet it is still on the register, carrying out regulated business, with investors in the schemes it manages none the wiser about the risks to which they could be exposed. As are 13 other Capita subsidiaries, despite the fact that at least one member of the parent company’s board also knew about the problems with Connaught and participated in the cover-up. So, being FCA registered or approved is no guarantee. Waddle, waddle!

One of the most alarming features of the fall-out from the Connaught fund’s collapse is how reluctant the regulator appears to be to point the finger of blame at Capita for setting up and promoting a scheme that let the bad guys take our money, then running away and hiding for cover, rather than fessing up and trying to fix the problem, when it realized what it had done. We’ve seen mealy-mouthed correspondence to MPs talking about the asset class being ‘speculative’ and hence unsuitable to the vast majority of even qualifying investors and claiming that the regulator’s powers over Capita are ‘very limited’ in respect of an unregulated fund, despite there being no difference under the Financial Services and Markets Act 2000 (FSMA) in the responsibilities of registered firms or the regulator’s powers over them according to the regulatory stance of the funds they manage. So far, at least, FCA approval would seem to be no guarantee of redress if things go wrong. Quack, quack!

You Brits like to say it’s an ill wind that blows nobody any good. I guess you guys never saw the twisters we get in the Midwest, nor the tornados down our East coast. But you may be right. While we’re naturally concerned that the Walker Crips scheme shouldn’t turn into a repeat of the Connaught fiasco, the new fund’s approval strengthens investors’ hands. No longer can the FCA credibly argue that it specialized in a speculative asset class or that registered businesses are not liable for their errors due to the nature of the fund.

Best of all, looking at the risk warnings in the Walker Crips IM, it is abundantly clear that none of them was the cause of investors’ catastrophic losses in the Connaught equivalent. That leaves only the explanation we outlined earlier in this blog: widespread, systemic fraud. And once the FCA recognises this, which we think it soon will, we cannot believe that it will be able credibly to maintain its reluctance to make those who were and are registered, who stood by and watched, compensate the victims for the losses they sustained.

So we don’t yet know for certain whether the Walker Crips scheme will be another duck. But we hope it may just have laid a golden egg…

]]>connaughtactiongroupWas the FSA misled and did certain parties fail to give vital information to the FSA?https://connaughtactiongroup.com/2013/06/24/was-the-fsa-misled-and-did-certain-parties-fail-to-give-vital-information-to-the-fsa/
Mon, 24 Jun 2013 14:40:06 +0000http://connaughtactiongroup.com/?p=682We have pointed out that Tiuta’s regular financial returns to the FCA must have been grossly misleading. The books were cooked. It looks like the FSA was misled over a considerable period as to Tiuta’s true financial position.

George Patellis called in BDO to advise Tiuta plc in January 2011 because he discovered it was insolvent and because he discovered the DS1 fraud (explained in previous blogs) and concluded that the Fund’s money had been misappropriated by Tiuta.

We have reason to believe the FCA may be coming to the view that Tiuta and certain professional counterparties may have been ‘economical with the truth’. As it happens, BDO is FCA regulated.

We offer our help to the FCA by setting out questions for BDO:

When BDO was engaged by George Patellis to investigate the fraudulent loans, what evidence were they given by him about the DS1 fraud and what did they uncover?

When BDO found out about the fictitious loans at the heart of the DS1 fraud, what did they do?

Why did BDO accept a highly restricted remit that involved taking figures from the directors at face value if they were on notice of fraud?

We assume that BDO advised the directors of Tiuta in February 2011 that Tiuta was insolvent. Why would it accept a role in handing monthly financial updates to the FSA on behalf of Tiuta if it had been told by George Patellis about the DS1 fraud?

Surely it would think that the information about the solvency of Tiuta was tainted and/or needed to be validated and that it should make its concerns known to the FSA?

Is there a possibility that the FSA might have been given the wrong impression, possibly by fraudsters at Tiuta, that BDO had validated the monthly updates?

Did BDO make its role clear to the FSA to avoid a false impression that the figures being provided to the FSA had been independently verified by BDO?

Did BDO check whether the recovery plan at Tiuta had actually been implemented?

Did BDO pass any comments to the FCA about the likelihood of the recovery plan ever succeeding?

Was there in fact a growing mismatch between the figures provided to the FSA and the true position of an ever deeper insolvency?

When the Fund finally collapsed, did BDO tell the FSA the truth about the fraudulent loans? If not, why not? It knew that it had been given prima facie evidence of fictitious loans by George Patellis in early 2011.

Steve Nicholas alleges that BDO entered a deal to share fees in connection with its appointment as administrator. Was there a secret deal to pay “introducers” of BDO to this rich seam of work?

An external observer might look at the entire sequence of events here and wonder whether BDO involvement was as ‘innocent’ as it initially appears.

We offer our help to the FCA with some questions for Capita:

When did Capita find out that unauthorised loans were being made outside the terms of the Investment Memorandum “IM”?

When did Capita find out that loans were being extended outside the terms of the IM?

When did Capita realize that the IM contained blatant lies, specifically the operating history of Tiuta Plc?

When did Capita realise that Mazars had been appointed to audit the Fund?

What were Capita’s concerns about Nigel Walter?

Did Capita worry that he may be dishonest due to his involvement with a major land banking scam which the FSA had put into administration in 2008?

Why did Capita require Connaught to remove Nigel Walter from the IM, but allow him to remain as an “adviser” to Connaught?

What due diligence did Capita undertake to verify that all the statements in the original IM were indeed accurate (as any person approving a financial promotion under section 21 of the Financial Services and Markets Act is required to do)?

Why did Capita decide to resign as Operator to the Fund? Why didn’t Capita suspend the Fund in view of its serious concerns?

Why did Capita ignore it responsibilities under Principle 11 to report evidence of fraud to the FSA?

It is up to the FCA to ensure that the regulator can never be so easily misled, by uncovering the truth, and make sure that those who deliberately concealed information from it (through the with-holding of material information) compensate investors.

]]>connaughtactiongroupPoor Record of the UK in Combatting Corporate Fraudhttps://connaughtactiongroup.com/2013/06/24/poor-record-of-the-uk-in-combatting-corporate-fraud/
Mon, 24 Jun 2013 13:40:27 +0000http://connaughtactiongroup.com/?p=680We have been saying on this website for some time that the UK lags well behind the USA in combatting corporate fraud.

Now, even the politicians in the UK are waking up to this fact. We re-produce here an article written by Emily Thornberry, MP, Shadow Attorney-General which appeared in “The Times” (of London) on June 20, 2013.

We have faced huge difficulties in persuading the authorities in the UK to investigate the widespread fraud at Tiuta plc.

There is a complex series of issues to resolve. The first is that most policemen in the UK would rather catch burglars rather than white-collar criminals. The second is that insufficient resources are provided to the police to investigate crimes and trace missing monies. The third is that the Financial Services Authority (now the Financial Conduct Authority) has not devoted sufficient resources to securing evidence of wrongdoing and launching preliminary investigations and passing on evidence of crime to the police where regulated companies, such as Tiuta plc, are involved. The fourth is that the FCA sees itself as a regulator and therefore it does not see its role as securing evidence or investigating fraud. A ponzi scheme, such as the Connaught Income Fund, Series 1 is viewed as a police matter. In fact, the police require material assistance from the regulator in order to be in a position to launch an investigation. Since regulated parties were involved, such as Capita, the regulator should have a major role.

In respect of the fraudsters at Tiuta and Connaught Asset Management, we are well aware that many investors and MPs are disgusted that it is taking so long for a criminal investigation to be launched. We are still hoping that the desire of right thinking people for justice will be met in due course. However, there are many barriers to be overcome. We hope that investors will continue to pressure their elected representatives and the Metropolitan Police to mount a full-scale investigation. We hope that investors will also write to the Financial Conduct Authority to ask that action is taken in relation to the crimes that are relatively simple to understand such as:

(a) the financial returns made by Tiuta plc to the FSA were fraudulent (as they showed that Tiuta was solvent when in fact it was trading whilst insolvent); and

(b) Connaught Asset Management undertook regulated activities such as running a sales team to sell the Fund to IFAs and their clients.

These matters are entirely different from the fraudulent accounting at Tiuta, the misappropriation of monies by Tiuta, the operation of a ponzi scheme by Tiuta and Connaught Asset Management, the publication of a fraudulent investment memorandum by Connaught Asset Management which was approved by Capita. All of these matters deserve investigation but are less easy to prove. The losses to investors in this case may amount to £80 million and yet insufficient resources are devoted to serious white- collar crime.

]]>connaughtactiongroupWarning : Do Not Deal with Mawdsleyhttps://connaughtactiongroup.com/2013/05/21/warning-do-not-deal-with-mawdsley/
Tue, 21 May 2013 12:42:38 +0000http://connaughtactiongroup.com/?p=6781. Alistair Mawdsley is back in business promoting an EIS investment to IFAs;

2. We suggest that IFAs should not deal with him as he has a history of misleading them, notably his gross misrepresentations concerning the financial position of the Connaught Income Fund,
Series 1;

3. We are given to understand that Mawdsley is not connected to the management of Sapphire Building Services and but IFAs and investors should conduct their own due diligence;

4. Members of the public should note that the EIS investment memorandum for Sapphire Building Services has not been approved as a financial promotion under Section 21 of the Financial Services and Markets Act 2000 and therefore it should only be made available to very narrowly focussed categories of investors, notably persons who are sufficiently sophisticated to undertake due diligence on investment in a private limited company and who can appreciate the risks involved of investing in a small unquoted company.

]]>connaughtactiongroupPanorama updatehttps://connaughtactiongroup.com/2013/03/29/panorama-update/
Fri, 29 Mar 2013 12:05:56 +0000http://connaughtactiongroup.com/?p=672Investors may already have seen reports that the edition of Panorama exposing those to blame for our losses has been delayed due to a complaint received by the BBC from twice-bankrupt former double glazing salesman Dave Ames. His company, Harlequin Property, allegedly took investors’ money to build luxury properties in the Caribbean without the necessary permissions or land ownership.

Ames claims that the producer, Matthew Chapman, hinted at the possibility of work with the BBC to encourage Ames’ former ‘security consultant’ to respond to an approach made over LinkedIn. There is no suggestion that any payment of any kind was made. The BBC is investigating the matter. We hope that Chapman, a BAFTA award-winning journalist, is swiftly cleared, and wish to offer him our unqualified support.

We have received assurances that the part of the programme relating to our complaints will remain unchanged, and that a new transmission date will follow shortly.

In the meantime, we hear that the FSA, which is due to morph into the FCA on Monday, has finally found its balls. It has fined insurer Prudential £30m and censured its CEO for failing to tell the regulator soon enough that it planned to acquire Asian insurer AIA [http://www.guardian.co.uk/business/2013/mar/27/prudential-tidjane-thiam-fsa-censure-fine]. At one point, it is rumoured, the FSA planned a £50m fine, and a separate financial penalty for CEO Tidjane Thiam. It did, however, warn that it was ‘necessary to send a clear message to directors of firms as to the fundamental importance of behaving openly and co-operatively towards the FSA.’

Capita’s sins make the Pru’s pale into insignificance. It knew that Nigel Walter was a crook, that loans were being extended and recycled and were being made outside of the agreed terms, that the information memorandum was misleading and that the guarantee from Tiuta was of little value, and it chose to slink away without telling the FSA or investors. We must hope that the FSA’s rebranding exercise will only strengthen its resolve to act decisively against regulated firms that conceal the truth from it, and that it will decide that nothing short of Capita compensating investors in full will be acceptable.

]]>connaughtactiongroupPanorama delayedhttps://connaughtactiongroup.com/2013/03/23/panorama-delayed/
Sat, 23 Mar 2013 01:15:15 +0000http://connaughtactiongroup.com/?p=670We hear that the Panorama edition planned for next Monday (March 25th) will be delayed for 2-3 weeks for operational reasons. Watch this space for news of the new transmission date and time.
]]>connaughtactiongroupThe Great Savings Wipe Outhttps://connaughtactiongroup.com/2013/03/20/the-great-savings-wipe-out-2/
Wed, 20 Mar 2013 12:18:56 +0000http://connaughtactiongroup.com/?p=663We hear that investors’ complaints over the inaction of Capita and the FSA are due to get much-needed publicity in an edition of the BBC’s flagship investigative programme Panorama due to be broadcast at 8.30pm next Monday (March 25th).

The programme, entitled The Great Savings Wipe Out, is presented and produced by the award-winning combination of Paul Kenyon and Matthew Chapman. They will be revealing how investors in two schemes – a dodgy hotel developer specialising in the Caribbean and the Connaught/Tiuta Ponzi fund – were fleeced under the noses of the regulator and others who had a duty of care to protect consumers’ assets.

In our case, the omission is all the more serious given that:

• The FSA knew Nigel Walter was a crook as early as April 2008 but failed to prosecute him, or even keep an eye on what he did next. He began work on creating the Fund that same
month – with his picture and biography in the original information memorandum…
• They also had detailed evidence of insolvency and fraud from the then CEO, George Patellis, in January 2011 but allowed the remaining, discredited directors to continue
trading with investors’ money
• Capita knew Nigel Walter was a crook in January 2009, if not before. The firm claims to have put in place measures to remove him from Connaught at that time, but failed
to check whether these had been followed through. And the company was trying to resign three months later, if not earlier
• The FTSE 100 group’s knowledge of the Connaught problems extended right up to the main board; it wasn’t just known by Capita Financial Managers, the subsidiary that acted as Operator

]]>connaughtactiongroupURGENT: Complaints to MPshttps://connaughtactiongroup.com/2013/02/26/urgent-complaints-to-mps-2/
Tue, 26 Feb 2013 15:21:59 +0000http://connaughtactiongroup.com/?p=655The Action Group would like to hear from investors who’ve complained to their MPs about the Fund. Specifically, we’d like to know whether or not you are happy with the way your MP has responded to you after he or she has contacted the FSA on your behalf.

A letter was recently forwarded to us from a volunteer in the UK who has been liaising with an investor who complained to his Member of Parliament. The constituent had received a response from his MP indicating that the FSA had advised the MP that the investor should complain to his IFA, then the Financial Ombudsman Service, about mis-selling.

The investor had provided his MP with no evidence or allegations of mis-selling but plenty of background on all the other problems we know about, including concerns about the FSA’s actions (or lack thereof) when it first became aware of wrongdoing.

The fear is obviously that the FSA may be underplaying those legitimate concerns with MPs and briefing them that this is primarily a straightforward mis-selling case, which we all know is not the full story. Of course, the incident we’re aware of may be an isolated occurrence and a simple misunderstanding on the MP’s part. We hope so. But if there’s any kind of spinning going on, particularly if it involves misleading elected representatives, we obviously need to raise the issue with the FSA at the highest level, and at the earliest opportunity.

If you’ve complained to your MP and your MP, having corresponded or met with the FSA, has responded telling you to complain about mis-selling by your IFA in the absence of allegations or evidence in support of such a claim, we’d like to hear about it. Please email Connaught.media@hotmail.com.

]]>connaughtactiongroupURGENT ASSISTANCE NEEDEDhttps://connaughtactiongroup.com/2013/02/10/urgent-assistance-needed/
Sun, 10 Feb 2013 01:34:36 +0000http://connaughtactiongroup.com/?p=644The Action Group urgently seeks investors who put pension money into the Fund and are willing to appear on a well respected British investigative television documentary talking about their experiences. To qualify you must be able to say yes to the following three questions:

1. Your SIPP (Self-Invested Personal Pension) or SSAS (Small Self-Administered Scheme) is a current investor in the Connaught (formerly Guaranteed Low-Risk) Income Fund Series 1. We are not currently interested in the Series 2 or 3 Funds and do not at this stage need volunteers who invested non-pension money in the Series 1 Fund;

2. You invested through an FSA-registered Independent Financial Advisor on the basis of the information memorandum, understood the proposition and believe that the Operator and Connaught misled you and your IFA;

3. You are willing to feature in the TV program. Please note that we do not wish to hear from people willing to talk off the record to the producers; what we need are people who are keen to appear on camera.

The program is being put together by a BAFTA award-winning producer who has previously put together well-regarded documentaries on financial services and banking matters. Investors with a journalistic background have been working with him from the outset and will help prepare you for the experience. We’re keen to hear from people of working age who invested pension monies in the Fund, as well as those already drawing on their retirement investments who saw the Fund as a low-risk source of income.

If you would like to take part, or would like to know more, please email connaught.media@hotmail.com. It’s vitally important that we have plenty of volunteers as the Fund’s many serious complaints against those who allowed our money to be stolen will get a lot more airtime and have much more impact if it’s backed up by real-life human experiences.

]]>connaughtactiongroupClaims against IFAshttps://connaughtactiongroup.com/2013/02/06/claims-against-ifas/
Wed, 06 Feb 2013 19:49:00 +0000http://connaughtactiongroup.com/?p=642The Action Group has been contacted recently by several investors who are contemplating claims against their IFAs for “misselling” the Guaranteed Low Risk Income Fund (subsequently renamed the Connaught Income Fund Series 1).

There are severe difficulties with making claims where the cause of loss for investors is fraud and the scheme was a Ponzi scheme. We have received evidence which shows that the fraudsters clearly lied to IFAs and this is a very serious issue to address. The IFAs may not have been negligent when carrying out due diligence on the Fund notwithstanding the information that they were given was a pack of lies. For example, how were they to know that Tiuta plc had bad debts when it claimed that there were none? Were they not entitled to rely on information provided by Tiuta plc (a firm regulated by the FSA) or by Capita (a firm regulated by the FSA) or by Blue Gate Capital (a firm regulated by the FSA)?

The Investment Memorandum contained a series of statements to the effect that the Fund lent monies on a short-term basis (bridging loans) to third parties secured on property on reasonable loan to value ratios. As Mike Davies (a person who was at various times an officer of Connaught Asset Management and/or Tiuta plc) explained to investors on August 13, 2011, this was not how the Fund was managed at any time. If the Fund had been managed as stated in the Investment Memorandum and the quarterly updates on the Fund, it would have been a medium risk investment. Clearly, it was not a low risk investment such as a bank account as the covenant of Tiuta plc (the FSA regulated firm that provided a guarantee to the Fund in 2008) was not as strong as that of a main street (or as you say in Britain) “high street” bank (given that the high street banks had an implicit state guarantee).

We are now piecing together a picture of who knew what and when. The most culpable seem to have been Capita which acted as the FSA regulated ‘operator’ of the Fund. We have evidence that it realised that the Fund was not managed in accordance with the memorandum and it knew there were loans to Tiuta that had not been authorised and that none of the short-term bridging loans had been repaid (merely renewed). Rather than close down the Fund, it sought to resign and pass on its role to another ‘operator’.

As we have stated in previous blogs, there were several parties who appear to have been negligent and thus allowed the fraudsters to prosper. These probably include the auditors of Tiuta plc (especially as the audited accounts for an 18 month period were radically re-stated) and also Mazars, the auditors of the Fund.

The investment memorandum could not have been promoted to the public had it not been approved by Capita as a financial promotion. Later investors may have seen later versions of the investment memorandum approved by Blue Gate Capital (a firm which replaced Capita as the operator and which must have been on notice that Capita had material issues concerning the operation of the Fund). Some investors have asked us about Mourants (now part of State Street) who were due to take over as operators of the Fund from Capita. It appears that Mourants contracted to replace Capita but then got cold feet and did not proceed. Blue Gate Capita replaced Capita instead.

We also have a large number of questions for the solicitors who at various times seemed to act for Connaught, Tiuta plc, Tiuta International Limited and the Fund. In particular, Lupton Fawcett has yet to explain how it could act for the Fund and Tiuta entities at the same time when the 2008 guarantee from Tiuta plc in favour of the Fund was nullified, the debts due from Tiuta plc to Tiuta International Limited were written off and a new inferior guarantee was put in place.

We have also queried the role of BDO and have yet to receive satisfactory answers to the allegations that it knew that there was widespread fraud in January 2011 and that the Fund was a Ponzi scheme. BDO continued to act for Tiuta plc whilst millions of pounds were stolen from the Fund and new investors piled into the Fund.

This is a complicated story and this is why we have called upon the FSA to organise a lifeboat for investors. The FSA should be putting pressure on Capita and others to contribute to a multi-million pound life boat to compensate investors.

It is quite extraordinary that those who are culpable are attempting to get away with fraud, negligence, etc whereas IFAs face huge claims. In fact, we have heard of individual IFAs leaving the industry and others who face bankruptcy because not only did their clients invest in the Fund, they also invested personally. There is not much point getting involved in expensive litigation (where the insurers of the better capitalised IFAs will join in third parties) unless you have evidence that your IFA was genuinely at fault.

In our view, this is not a misselling scandal. This is a Madoff style Ponzi scheme where fraudsters were allowed by negligent firms to misrepresent the true position to IFAs and their clients.

If you sue an IFA, you have to demonstrate that he was negligent. the IFA may in fact be the wrong target.

It may be easier to prove that the Investment Memorandum was wholly misleading and that Capita and (later on) Blue Gate Capital should not have approved it as a financial promotion. The due diligence that they undertook was plainly inadequate and later on they knew or must have known that the Investment Memorandum was misleading. As Mike Davies told investors on August 13, 2011, the Fund never was managed as set out in the Memorandum. It is a breach of the FSA’s conduct of business rules to approve a promotion that is plainly wrong. It was NOT clear, it was NOT fair and it WAS misleading. This gives rise to a cause of action (and damages) under Section 150 Financial Services and Markets Act 2000.